RealNetworks meets 3Q forecasts, sees ad slowdown

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RealNetworks (Nasdaq: RNWK) met the consensus analyst estimate in the third quarter, but sounded alarm bells on online advertising.

After market close Tuesday, the provider of streaming media software and content posted third quarter net income of $7.6 million, or 4 cents per share, excluding special charges. That was in line with the consensus of 27 analysts surveyed by First Call.

Shares of RealNetworks fell to 18 in afterhours activity on the Island electronic communications network, immediately following the release of quarterly results. RealNetworks stock closed Tuesday's regular trading at 21.6875, down 3.125 for the session.

Including acquisition-related charges and goodwill writedowns, RealNetworks lost $30.8 million, or 20 cents per share.

Third quarter revenue increased 92 percent year-over-year to $67.1 million, about what analysts expected. The Seattle-based company got about 20 percent revenue from ad sales, and said some ad contracts struck last year were renewed at lower rates that amounted to about $3 million less than before, Chief Financial Officer Paul Bialek told a conference call.

"I think what you're going to find is a shifting of the revenue mix among the different line items -- the license revenue and service revenue having strong growth, we have to model, of course, the advertising sequentially probably down given the $3 million we're taking out of the equation," Bialek said.

But Bialek said Real was not changing its overall financial guidance and expressed long-term confidence despite the company's near-term worries.

"That's not to say that the value play longer term is impacted. In fact I feel very very good about that. It's just a reflection of where the near-term financial markets are," Bialek said of the advertising slowdown.

RealPlayer software now has more than 150 million registered users, an 85 percent increase year-over-year, the company said. RealNetworks cited Media Metrix statistics showing the Real.com network reached 37 percent of the Internet's home audience in August. Only Microsoft (Nasdaq: MSFT), Yahoo (Nasdaq: YHOO) and America Online (NYSE: AOL) had a wider reach.

-- Reuters contributed to this report.

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